The Federal Communications Commission may still be able to enforce open network regulations despite losing the latest court case

Editor’s Note: As this podcast was being prepared, on 19 February 2014, the U.S. Federal Communications Commission announced plans to issue network neutrality regulations under another section of the Telecommunications Act, and reserve the right to reclassify ISPs from their current status of information services.

Stephen Cass: The Internet was built out from its humble beginnings largely on the basis of informal networks that strove to make the networks of networks as transparent as possible. Except in cases of obvious abuse, all Internet traffic was treated the same regardless of the application or service generating it. This is the principle of “net neutrality,” and it’s come under fire in recent years.

In the United States, some large ISPs argue that they are being unfairly asked to support the costs of companies like Amazon or Netflix, which are responsible for sending large amounts of traffic to end users. The ISPs would like to be able to throttle traffic in some cases, unless the companies or the customers are willing to pay for a higher level of service. ISPs have been prevented from doing that by regulations issued by the U.S. Federal Communications Commission (FCC), but a court in January ruled that the FCC’s legal basis for those regulations was flawed.

Here today to discuss that ruling and its implications is John Bergmayer, a senior staff attorney at Public Knowledge, a not-for-profit public interest group that campaigns to preserve the public’s access to an open Internet.

Hi, John, welcome to “Techwise Conversations.”

John Bergmayer: Hi, there.

Stephen Cass: So before we get to the ruling itself, why do we need to impose net neutrality regulations on ISPs? After all, the Internet has done pretty well in a laissez-faire environment…

John Bergmayer: Well, most of the Internet does not need to be regulated. The problem is Internet access—broadband Internet access—is simply not a competitive market. And these broadband Internet access providers have quite a bit of power, and customers don’t have the option in most cases of switching to a competitive provider. So regulation is needed to make sure that consumers are protected and that they can access the services they want to access on the Internet without undue interference from their broadband access provider.

Stephen Cass: So Christopher Yoo, a professor of Internet law at the University of Pennsylvania Law School, has written that the opposite of net neutrality is “net diversity.” What do you think a world of net diversity would look like?

John Bergmayer: The ISPs want to, as they say, experiment with a lot of different business models. They call it innovation, but the problem is, this innovation doesn’t necessarily favor the interest of consumers, and it doesn’t promote competition among the edge services—you know, the Netflixes and the Amazons and the smaller providers. The ISPs want to innovate, but they only want to innovate for themselves, and unfortunately the innovation that they want to do would interfere with the innovation that other people want to do.

So “net diversity” sounds great if we had a competitive marketplace where different ISPs could do different experiments and people could pick and choose and select the one that suits them best. But when it comes to wireline broadband Internet access, there’s simply not a competitive market. There’s nothing to ensure that the diverse experiments they want to do will actually serve the interests of their customers, which are residential broadband Internet access users.

Stephen Cass: This problem about a lack of competition in that “last mile”—some net diversity advocates have said that this kind of ability to innovate will create competition in the last mile. Can you respond to that?

John Bergmayer: The last mile in a lot of different areas has competitive problems, and we haven’t seen innovation that can really fix it, because the problems that we’ve seen are structural. When it comes to electricity delivery, or when it comes to water service to your house, we recognize that these are natural monopolies. Broadband in some places is not that bad because we have the phone network and the cable network. They used to be two different things, and now they’ve converged, so now sometimes people have two choices. But for the most part, the economics don’t support building out various competitive wireline infrastructure to everyone’s house.

Now, obviously, in downtown Manhattan you can have competitive providers because there’s so many people that it becomes economic to do something like that, and then people will point to, “Well what about wireless?” Maybe one day wireless will have not only the bandwidth but also the pricing plans and the ability to have sustained heavy use from many, many people at once. But we’re not there yet. So when it comes to competition, I don’t think we can just hope that one day competition will develop and have a regulatory system that’s based on that. Instead, I think we need to respond to the market conditions that we see today and look at reality and look at the choices people actually face.

Stephen Cass: So how do you respond to people who believe that these net neutrality [issues] are really only relevant to the big players who are generating very large amounts of traffic: Netflix, Google, Amazon, and so on?

John Bergmayer: I’m not really as concerned with the interests of the big players. The people who are already successful, they already have capital, they already have investors, because they might be able to survive in an environment where there is no net neutrality.

What I’m concerned about is the small players. If we want to have competition to Netflix, if we want to have competition to Google, those are the sorts of companies that can’t necessarily afford to go around to every terminating access provider—would be a technical way of calling it—in the country or even the world and cut the deals to make sure their service is usable. I think that’s quite a high burden, and it creates barriers to entry to Internet companies that really never existed before. Where in the past they were able to grow slowly and gracefully, now in order to get off the ground, you might have to go around having your lawyers talk to the lawyers of different ISPs and come to a deal, and I think that would be terrible.

Stephen Cass: So turning now to the appeals court ruling, how did the FCC’s regulations get overturned?

John Bergmayer: Sure. So the FCC, years ago, decided to classify broadband access as an information service instead of a telecommunications service, so that means it was more in the same regulatory category as an online database or website than telephone networks have been. As a result, it had been largely deregulated, and then when the FCC starts to notice there still are problems with broadband access and we want to make sure that there are some protections, they enacted protections on ISPs, but without changing their basic regulatory classification as information services to telecommunications services. What the District of Columbia court of appeals said was, “You can’t do that.”

Now, it’s important to note that the court supported the FCC’s reasoning. The court said, “Yes, the FCC has adequately laid out that there is a problem and the rules are a good fix to that problem. However, because of this legal technicality of classifying broadband ISPs as information services, these rules are not valid. And if you would want to do rules like this, you need to classify them as communications providers.” So although I was disappointed that the rules were struck down, it leaves the FCC with a very clear path to bring them back, which is simply to reclassify broadband Internet access as telecommunications, which common sense tells you that it is much more of a telecommunications service than an information service.

Stephen Cass: Is there any indication that the FCC is going to do this reclassification?

John Bergmayer: You know, it’s still uncertain. They’re processing the implications of the decision. There’s a lot of legal technicalities and political realities that they have to take into account, and the FCC has a very busy agenda, so we’re still waiting to see what they’ll do. You know, I remain confident that the FCC will realize that the best way to protect net neutrality is reclassification.

Stephen Cass: And what would be some of the downsides of reclassification?

John Bergmayer: I don’t think there are downsides in terms of outcomes, but, sure, the legal process could be a little bit complicated because telecommunications regulations, some of them the FCC would not want to impose on broadband Internet access because some of them are crafted for the telephone network more. So the FCC would essentially forebear from those regulations.

The FCC has the power to call something a telecommunications service but then say, “Well, obviously if there’s some FCC rule that has to do with minutes of voice calling or something like that, those don’t apply to broadband.” And similarly, I don’t think there’s a strong case right now for the FCC to engage in, say, rate regulation, which telecommunication providers in the past have been subject to. So the FCC would, in addition to reclassifying, go through a process of deciding which rules to apply and which rules not to apply to broadband. But I don’t think that’s really a downside. That’s just a fact of life at an administrative agency, is sometimes you have to go through this legal process to decide exactly how to proceed.

Stephen Cass: If attempts to restore net neutrality don’t succeed, what kind of changes do you think consumers will see, and how quickly will they occur?

John Bergmayer: I think there’s a bunch of problems that can happen. The long term is we don’t want Internet access to become much more like cable television, where you can only access the content that your cable provider has cut deals with in some way. I don’t think, though, that the changes would be very sudden. I think ISPs know that if they go too far too fast, even without rules, that could prompt new legislation, consumer outcry of some kind. So what’s more likely to happen is things will change slowly. Over time they’ll introduce new services that are not neutral. One thing we’ve seen is that when customers are on subscription plans with data caps, they’ll exempt some services from the caps. So that’s a way of discriminating in favor of a service by making it basically cheaper for customers to use but that doesn’t actually involve blocking or degrading other people’s services.

Another issue we’ve seen is where last-mile ISPs—it is claimed—are not providing adequate interconnection facilities for other Internet services, so they’re not really blocking the services, but they’re making it very difficult for the services to reach consumers.

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